Luxury tax on super-rich could hit EVs: expert
OTTAWA — A new tax on yachts, luxury cars and private aircraft aimed at the super-rich could also hit electric vehicles a tax expert warns.
The luxury goods tax, which will come into force on Sept. 1, will cover cars and SUVs, as well as private planes and helicopters, worth more than $100,000. The federal tax will also cover yachts and boats worth more than $250,000.
But senior tax lawyer Helena Gagne says the new tax could also hit some electric and hybrid vehicles, including Tesla and BMW models, which cost more than $100,000.
The federal government has been encouraging Canadians to invest in clean technology and zero-emission vehicles, which can carry a higher price tag than cars that run on fossil fuels.
Gagne said when the luxury tax was introduced the Department of Finance said those who can afford to buy luxury goods can afford to pay a bit more.
“It seems to be assumed that it is only the wealthiest who will be impacted by the luxury tax but it is not necessarily the case,” said Gagne, a partner at Osler, Hoskin & Harcourt LLP. “It can also impact indirectly taxpayers who may not consider themselves as being among the wealthiest but who may decide to purchase an electric vehicle with a retail sales price that happens to be over the $100,000 threshold.”
Adrienne Vaupshas, a spokeswoman for finance minister Chrystia Freeland, said the measures are not designed to hit the middle class and the threshold for the boat tax was deliberately set at $250,000 so it would cover superyachts and not middle-class families buying boats.
Vaupshas said it was “only right and fair that the very wealthiest are asked to pay their fair share.”
“The government was re-elected on a platform that included a commitment to bring forward a luxury tax on yachts, private jets, and luxury cars and implementing this measure is a priority,” she said.
The tax was originally proposed in the 2021 budget. It will cover luxury cars, planes, and boats bought for personal use and leisure. Commercial vehicles, including small planes selling seats, and emergency vehicles are among the classes of vehicle exempt from the new tax.
The tax amounts to either 10 per cent of the taxable amount of the item or 20 per cent of the amount over the price threshold — whichever is less.
Conservative finance critic Dan Albas accused the government of introducing a “job-killing” tax “that will devastate Canada’s car manufacturing sector, boating sector and aerospace sector.